This paper provides the first empirical investigation of the influence of credit default swaps (CDS) on the surge in subprime mortgage defaults, which is widely believed to be a driving force in the 2008/2009 financial crisis. In the years just before the 2008/2009 financial crisis, private...

We offer the first empirical evidence on the adverse effect of credit default swap (CDS) coverage on subprime mortgage defaults. Using a large database of privately securitized mortgages, we find that higher defaults concentrate in mortgage pools with concurrent CDS coverage and within these...

There exists strong commonality in credit risk across sovereigns [Pan and Singleton (2008); Longstaff, Pan, Pedersen and Singleton (2011)]. This paper embeds this commonality into a rating-based, reduced-form model. A parsimonious version of the rating-based model can adequately capture the...